Morning Commentary: The British Pound – On the Ropes

Foreign Exchange - Morning Commentary

The British Pound – On the Ropes

Share this story:
Facebook
Twitter
LinkedIn
Email
Alan Rose
Alan Rose
Foreign Exchange Senior Trader
As we arrive this morning, markets are continuing to recalibrate the effects of Friday’s stellar U.S. jobs report on Fed policy going forward. Markets hopefully will gain new insight into Fed policy as Fed Chairman Powell’s semi-annual testimony before Congress will begin tomorrow. Most of the markets movements over the past 48 hours are correcting all the hyper-euphoria surrounding the expectation of future Fed rate cuts. Equities continue to correct lower, G7 interest rates are steady to higher for the third day in a row, and the U.S. dollar (DXY) is up for third day in a row.
 
In the background of all this re-thinking of U.S. monetary policy, the British pound remains under pressure. It has fallen in six of the past seven sessions, and it is the weakest of the major currencies over the last month and over the past three months (-4.60%). The GBP is challenging its lowest levels of 2019. There are numerous reasons for this continued pressure of which most center on the politics and final outcome of the Brexit negotiations. But, there is more to this story than just Brexit.
 
The U.K. continues to face a challenging external accounts position with a widening trade deficit and current account deficit. The U.K. faces the uphill task of generating enough capital inflows to fund the largest current account deficit in the developed world while at the same time offering investors lower real yields. U.K. GDP growth rates have been on the decline, and it appears that the market consensus is building that a weaker GBP is in the cards to reflect all this uncertainty; a weaker GBP is one of the few levers left to help stimulate growth, and the market seems to be accommodating that proposition.
HERE ARE THE KEY NEWS STORIES FROM OVERNIGHT:
  • The Aussie dollar is the weakest major currency today and has now fallen four straight days after surging since the middle of June. A sharp fall, from seven to two, in the key NAB June business confidence index has mainly triggered today’s decline in the Aussie dollar.
If we can help you with any Foreign Exchange needs, please email foreignexchange@cnb.com or call (800) 447‑4133.
Want to learn more about international finance, economics, and global events? Sign up for our other Foreign Exchange emails and videos!
Follow City National Bank on social media:
Facebook Twitter LinkedIn Google Plus YouTube
Non-deposit investment products:
Are not FDIC insured,
Are not deposits or other obligations of City National Bank and are not guaranteed by City National Bank, and
Are subject to investment risks, including possible loss of the principal invested.
This report is for general information and education only and was compiled from data and sources believed to be reliable. City National Bank does not warrant that it is accurate or complete. Opinions expressed and estimates or projections given are those of the authors as of the date of the report with no obligation to update or notify of inaccuracy or change. This report is not a recommendation or an offer or solicitation to buy or sell any financial instrument discussed. It is not specific investment advice. Financial instruments discussed may not be suitable for the reader. Readers must make independent investment decisions based on their own investment objectives and financial situations. Prices and financial instruments discussed are subject to change without notice. Instruments denominated in a foreign currency are subject to exchange rate and other risks. City National Bank (and its clients or associated persons) may engage in transactions inconsistent with this report and may buy from or sell to clients or others the financial instruments discussed on a principal basis. Past performance is not an indication of future results. This report may not be reproduced, distributed or further published by any person without the written consent of City National Bank. Please cite source when quoting.
Unsubscribe from this list  |  Update email preferences
This message has been sent to bank@banking.offers.report. Please do not reply to this email. To ensure the delivery of future emails, please add foreignexchange@emails.cnb.com to your email address book or safe sender list.
Copyright ©2019 City National Bank – All Rights Reserved.
350 South Grand Avenue, 12th Floor, Los Angeles, CA 90071
City National Bank is a subsidiary of Royal Bank of Canada.
TERMS & CONDITIONS  |  PRIVACY STATEMENT
Equal Housing Lender
NMLSR ID# 536994 | City National Bank Member FDIC
                                                           

Comments

Popular posts from this blog